2 Al Presidente della Commissione Industria, Commercio e Turismo del Senato della Repubblica On. Sen. Massimo Mucchetti Palazzo Madama - Piazza Madama Roma Al Presidente della Commissione Affari Costituzionali della Camera dei Deputati On. Francesco Paolo Sisto Palazzo Montecitorio - Piazza Montecitorio Al Presidente della Commissione Bilancio della Camera dei Deputati On. Francesco Boccia Palazzo Montecitorio - Piazza Montecitorio All On. Maino Marchi Commissione Bilancio della Camera dei DeputatiPalazzo Montecitorio - Piazza Montecitorio Dear Sirs, On behalf of the undersigned international investment institutions, investor trade associations, advisory bodies and concerned individuals, we wish to convey our concerns regarding current parliamentary discussions surrounding the potential introduction of multiple voting rights at Italian listed companies. We also take this opportunity to note the parallel position statements issued by Assogestioni (http://www.assogestioni.it/index.cfm/1,147,10681,49,html/voto-maggiorato-e-votoplurimo-un-vulnus-al-principio-di-one-share-one-vote) and the International Corporate Governance Network (https://icgn.org/images/28_jan_italy_growth_decree_icgn_prof_padoan.pdf), and submit the following statement with a view to highlighting our shared objectives on this important matter. PREAMBLE: Last June, the Growth Decree introduced by the Italian government in 2014 to reform and restart the economy added a provision that gained scant international notice, but raises serious concerns for minority investors: it enabled listed companies to grant double voting rights to shareholders that have owned their shares for at least two years. These so-called loyalty shares were intended to discourage short-termism by rewarding long-term holders. In fact, however, the experience of France, which has had a type of loyalty shares for years, has demonstrated that it is 2

3 almost exclusively controlling shareholders that take advantage of this option, by doubling their voting weight at shareholder meetings and effectively preserving their control while halving their economic exposure. For this reason, minority shareholders, i.e. institutional investors, are strongly opposed to loyalty shares. They have taken action today to prevent the Italian government from enshrining them in law by insisting that an exceptional provision to ease their introduction by listed companies be allowed to sunset on January 31 st as originally promised. Under Italian law, a two-thirds majority vote at a special meeting is required for the introduction of loyalty shares. However, a provision inserted last July by the Italian Parliament allowed for such resolutions to pass by a simple majority which, given low voter turnout, gives a clear advantage to controlling shareholders and makes it much harder for minority investors to block the adoption of rules that erode their fundamental rights to equitable treatment. While the amendment was originally intended to sunset by January 31st, a House of Deputies Committee has called for its renewal through 31 st December 2015, in the hope of easing the approval of multiple voting rights proposals at the next wave of annual meetings in Italy this spring. The two-thirds majority requirement for special meeting resolutions was among the most effective innovations of the Draghi Law of 1998: in one simple step, Italy met the best international standards in protecting minorities from the risk that the majority holder unilaterally alter shareholders' rights. Consequently, lowering the quorum required for passing a decision as important as introducing loyalty shares seriously harms minority investors interests. Three Italian companies (Astaldi, Campari, and Amplifon), all with majority shareholders, convened meetings last week to take advantage of the lower quorum and won shareholder approval to amend their statutes a foregone conclusion given their ownership stakes above 50%. With double voting rights, their controlling shareholders have, in effect, gained perpetual control of special meetings, a de facto repeal of the protection that minority shareholders had enjoyed for nearly twenty years: assuming dominant shareholders will be the only ones to double their vote, those that control these three companies will make up two-thirds of the votes in the general meeting, enough to pass any resolution unilaterally. RECOMMENDATION: It is regrettable that the Italian Government and Parliament introduced the exception to the two-thirds majority requirement last summer, but now is an opportunity to rectify the situation by allowing the sunset clause originally due to have taken effect on January 31 st to apply as intended. To extend it as per the current House proposal would send a negative signal to institutional investors, both domestic and international, and damage Italy s attractiveness as a destination for the investment capital the country needs. Institutional investors must, as in all other developed capital markets, retain their collective veto power on fundamental aspects of the life of controlled companies. They must also be able to continue to rely on the protections long afforded by law that are essential to enable transparent and accountable corporate practice. We therefore urge the Italian Government and Parliament to disallow the temporary extension of the lower quorum for the introduction of loyalty shares and demonstrate their commitment to the fair treatment for all investors. This, in turn, can help encourage the flow of 3

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